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Franco-Nevada

Orion (Oil)

LOCATION: Alberta, Canada
OPERATOR: OSUM OIL SANDS CORP.
ROYALTY: ROYALTY RATE 4%

In the third quarter of 2017, Franco-Nevada acquired a 4% GORR on the Orion Thermal Project in the Cold Lake region of Alberta from Osum Oil Sands Corp. (“Osum”) for C$92.5M. The royalty applies to the Clearwater formation and allows for the deduction of transportation and diluent costs associated with getting the product to market.

Orion is a Steam Assisted Gravity Drainage (SAGD) operation that began commercial production in 2007. The asset has a large resource base capable of supporting the production of heavy oil for many decades. At year-end 2018, Orion was producing approximately ~15,000 barrels per day of bitumen. Production is set to increase as Osum carries out the implementation of phased expansions. The company recently completed Phases 2A through 2C, which are expected to increase production to approximately 18,000 barrels per day by the end of 2019. Osum has regulatory approval for and is targeting production of up to 20,000 barrels per day with the completion of Phase 2D.

Franco-Nevada recorded revenue of $3.7 million in 2018. Orion realized prices are based on the WCS benchmark which experienced wider than normal differentials during the back half of the year, and which led to government mandated volume curtailments, both of which negatively impacted royalty revenues. Revenue is expected to increase going forward as the WCS differential improves, government curtailments are removed, and the production capacity is further expanded.

ASSET HIGHLIGHTS:

  • Long life resource located in Canada
  • Stable year over year production volumes
  • Revenues expected to increase as operation is expanded

2018 2017 2016
Revenue to Franco-Nevada ($ million) $ 3.7 $ 1.5 $ –